Warren Buffett, CEO of Berkshire Hathaway and up to now a famous avoider of tech stocks, disclosed today on CNBC that his company has accumulated a huge investment in IBM. Berkshire spent about $10.7 billion this year to buy 64 million IBM shares, acquiring a bold 5.5% stake in the company.

IBM’s nearly $100 billion in revenues last year made it the 18th-largest company in the Fortune 500. Companies of that size, sporting huge market caps as well, are a prerequisite for Buffett when he is doing what he wants to do — commit billions of Berkshire’s money to a new investment. Small-cap stocks just can’t absorb enough of Berkshire’s dollars to count.

Buffett has been patiently buying IBM since March — 64 million shares don’t cascade in overnight. On the figures he’s announced, $10.7 billion for 64 million IBM (IBM) shares, Berkshire’s average cost-per-share works out to about $167 (though Buffett rounded that to $170 in his CNBC conversation this morning).

IBM’s stock closed last Friday at $187.38 a share, which means that Berkshire currently has a gain in its position of more than 10%. IBM has been a strong market leader this year, rising more than 25% versus a 2% rise for the Dow Jones Industrials.

At IBM’s current price, Berkshire’s 64 million shares have a market value of a little more than $12 billion. Were Buffett today to list Berkshire’s (BRKA) largest stockholdings, as he does every year in the company’s annual report, IBM would rank behind only Coca-Cola (KO). Berkshire’s 200 million shares of Coke have a current market value of about $13.6 billion.

Talking on CNBC, Buffett complimented Lou Gerstner for picking IBM up off the ground, setting it on a growth path, and ultimately picking a first-class successor, Sam Palmisano, who became CEO in 2002. As Fortune noted in an article about Palmisano and IBM early this year (IBM’s Sam Palmisano: A super second act), he has since 2002 powered earnings to $11.52 per share in 2010, broadened IBM’s geographical reach, and expanded the company’s supercomputing and analytics businesses—hello, Jeopardy champ Watson.

What’s more, Buffett approvingly noted that Palmisano has done it all with a stated, publicized plan and met every objective. Buffett said that Palmisano has “delivered big-time.”

One of Palmisano’s goals was to return money to shareholders, both by raising IBM’s dividend — it’s quintupled since 2002 — and repurchasing large quantities of IBM’s stock. In Palmisano’s tenure, IBM has bought more than 30% of its shares.

Buffett has always been a strong believer in companies buying their own stock when it’s undervalued, which clearly both he and Palmisano have considered IBM to be. Commenting to Fortune in the 1980s about stock buybacks made at intelligent prices, Buffett said they were close to “a polygraph” for determining whether a management was acting in the shareholders’ interest.

In a sense, Buffett and Palmisano have been in competition for IBM’s stock this year. While Berkshire was paying its $10.7 billion for 64 million shares, IBM itself spent nearly $11.5 billion in 2011’s first nine months to buy almost 69 million shares.

IBM’s cost-per-share for the stock it repurchased in those nine months was about $167 — just what Berkshire’s cost is on the facts that Buffett has announced for the March-into-November period.

Buffett has not met Palmisano (whose name Buffett bobbled once today) nor his just-announced successor, Virginia Rometty, who will take over as CEO at yearend. Buffett, however, was in the audience at Fortune’s Most Powerful Women’s conference in early October when Rometty was a featured speaker. (In a 1-out-of-365 chance, or less considering Leap Year, Palmisano and Rometty share the same birthday, July 29^th; is that an omen of some kind?)

Palmisano, 60, is to stay on as IBM’s chairman and will no doubt be unflaggingly watching what happens under IBM’s latest stated, publicized plan, called the 2015 Roadmap. The plan calls for operating earnings per share to rise from $11.67 in 2010 to at least $20 in 2015. More buybacks are also on the agenda, though naturally they will need to be made at prices that don’t make the polygraph blow a gasket.

Buffett said today that if IBM got its shares down to 64 million — Berkshire’s holding, that is — he’d be happy. That won’t happen, of course, but Buffett probably figured it wouldn’t hurt to give IBM a nudge.

Fortune senior editor-at-large Carol Loomis, who wrote this article, is a long-time friend of Warren Buffett’s and a Berkshire shareholder.